I often spend upwards of $150 per month in coffee shops, where I do much of my (remote) work (25+ hours per week). Since I don’t pay office rent, I perceive these expenses as replacing my fixed rent costs, and I tend to spend more money at coffee shops when I’m camping out for a 2- to 4-hour work session, so these expenses strike me as legitimate business expenses. Has anybody gone down this road with the IRS? Is anybody aware of any official guidance or precedence for this?
Possibly, talk to your accountant about this.
is one of the reasons why I pushed for my boss to do a coworking service. I used to do remote working 2 years ago and I end up spending 15- 20 dollars a day for a coffee, if you need to sit down there for the whole day. With Crappy or non existent WIFI service, no power outlets. But still I have to spend almost $20 a day! From this I pitched in the idea of coworking space to my boss. Now we are operating one with bottomless coffee and much much more cost efficient. It does not answer your question, but I feel for you.
I do this, but it stems from two reasons:
- Back a few years ago, my internet service was really spotty (yuck AT&T) and I couldn’t rely on it for any consistent work, so I had to go to cafes (no coworking existed nearby).
- Second, when I’m traveling I rarely find decent wifi so I end up at cafes and haven’t had to do a dedicated day at a coworking spot.
My accountant writes off much of my cafe time (since 2008 or 2009), but that’s him
Not sure about that.
If you pay with your business card it would be easier to justify, however, if you do this and have a huge conversion fee it might be worth it.
Regardless of whether you file it as a deduction or not, the likelihood that this deduction would survive an audit is almost nil.
You’re not supposed to deduct personal expenses. You can claim that you spent more than you normally would have, but for the business expenditure, (Sutter rule), however the burden of proof (must be explicit) is on you. If it becomes your normative state, you’re unlikely to prevail. What you’d have to prove is that you normally spend $2 a day on coffee (show receipts for purchased coffee) but on that particular day, you spent $5 as a result of (x). (x) can be a meeting or some other justifiable expense.
The IRS allows business deductions that satisfy two subjective words; ordinary and necessary. Source.
Ordinary expenses are those that are typical in your line of work.
Necessary expenses are those that you must make in order to eventually receive some income.
So, the riddle to answer is if you could you justify your coffee expenses as both ordinary and necessary for your line of work. Thennnn, you may have different “facts and circumstances” where a coffee may be deductible one day and not the next.
Another thing to be aware of is the IRS only allows you a 50% business deduction for meals and entertainment expenses…so in an audit they might try and limit/reclassify the amount you took to 50% unless you can detail otherwise.
Be aware of the a) directly related and b) associate with tests the IRS expects to apply to meals/entertainment expenses.
I know it sucks, but you really should document/detail your reasoning for these sort of expenses.
Three examples of how things could potentially play out under varying facts and circumstances:
a) If I have no reliable internet at my campsite or at my airbnb and I go to a cafe, then I feel the facts and circumstances say the coffee I purchase is an ordinary and necessary expense for me to incur to use the wifi at someone’s cafe. 50% deduction, though b/c it is a meal item.
b) I have good internet and choose to go to a cafe to work = a personal decision and no business deduction.
c) Go to a cafe in New Zealand where you have to pay 5NZD for power/wifi to get your work done and buy a coffee. Wifi/power purchase would be 100% deductible while coffee would be 50%.
At the end of the day, the burden of proof for your decision is on you in an audit. If you don’t have details explaining your decision, you’re more than likely not going to get any sort of deduction.
I hope that helps!
Unless you’re traveling, it’s unlikely this would fall under “meals and entertainment,” since there’s no bonafide meeting.
No matter how you go, it’s a stretch to justify it and you’d be taking a risk if you’re audited. It ultimately depends how much risk you’re willing to take on.